I found out that it is very difficult to make good mistakes

Category Archives: Development

The power of the state to influence operations and success of businesses is accepted in virtually all policy circles, though traditionally this focus centers on regulatory and tax regimes. Less obvious is the hidden intersection of governance and markets which distorts and subverts both. In Asia, the rapid evolution of markets in many countries over the last century has made government interactions with those markets more uncertain: the lack of durable institutions and legal traditions in the area has created a series of more ad hoc relationships. Corruption and rent-seeking behaviors by bureaucrats is somewhat inevitable in this climate.

Foreign investors have been cutting exposure to rupiah bonds and stocks for weeks, suspending a long spell of bullishness based on Indonesia’s high yields, strong growth and its swift ascension into the investment grade club.

Fund managers have been distancing themselves from the rupiah market too, moving to neutral or even underweight positioning.

So when the same set of investors lapped up a $2.5-billion global dollar bond issued by Indonesia late in April, it was clear that their doubts and unease lay not with the fundamental attractiveness of Southeast Asia’s largest economy, but rather with assets denominated in the local currency, the rupiah.

“This year won’t be the year for Indonesia,” said Arnout van Rijn, chief Asia-Pacific investment officer for Robeco.

Foreigners hold about a third of local bonds, which exposes the $84-billion market to a brutal sell-off should the global risk environment change. And the burden of servicing foreign creditors is burning a hole in Indonesia’s external account, which is already hurting from slowing exports.

Monetary policy must be extremely hard to manage in a relatively small nation faced by currency speculation and other external pressures. Indonesia is at something of an intersection point for such concerns, as even in an otherwise positive business climate, currency pressures make international investors uneasy.

It’s easy in the United States to wave a hand and ascribe currency fluctuations as meeting whatever inflation target we’re currently identifying, or the largely tangential movements of other nations money. But smaller nations have only limited foreign reserves, making government intervention to stabilize their currency less practical.

This problem often makes development operate in fits and starts, if not even more abortively. Indonesia is in the unfortunate position of doing most things right, and still losing.

I’ve been pretty happy with some of the pushback I’ve seen on Facebook regarding the Kony 2012 stuff, but the cohort of people I’m friends with skews towards individuals who have a competitive incentive to know what the LRA is, so that helps.

Kony is probably not especially nice. I don’t think that’s sufficient, but there are a lot of uniquely awful things in the world and not all of them are helpful enough to have a face. The strategy of comparing him to Hitler is disingenuous and rather useless hyperbole. He’s hardly the worst, even among contemporaries, and certainly not if we evaluate non-human bad things. Nonetheless, aid organizations have a similar problem as environmentalists: we want to act on trendy or sympathetic issues, so pandas and Kony get the dollars and the headlines, while insects and agricultural assistance get ignored.

All of the articles I’m linking are worth reading in full, but the highlights: Continue reading →

I think a lot about the problems of descriptive versus predictive data, and this comparison exemplifies that tension. Michael Spence’s The Next Convergence relies on a well-meaning optimism, indicating frequently that Asian growth is a test case for African development. This is probably an imperfect analogue; institutions matter, history matters, geography matters. There are a lot of factors that aren’t captured in GDP or per capita income.

Maybe Asian nations which have exhibited rigorous growth have better transportation networks, or closer trading partners, or superior soil types, or a more educated labor pool than their equivalent-GDP cohort in 1950. Saying Singapore started in the same position as Equatorial Guinea ignores the successes of one and the problems of the other.